Posted: May 16, 2013 12:29 PM by Alex Labat
Updated: May 20, 2013 10:43 AM
In order to make money, you have to spend money. According to certified public accountant Burton Kolder, LUS Fiber's spending is about to pay off.
"The revenues in Fiber increased from $17 million last year to over $24 million for the current year," Kolder said. "it was over a seven-million-dollar increase, and that represents a 41% increase in revenues on the Fiber side."
LUS Director Terry Huval says Fiber's customer base is growing. Fiber's increased cash flow is used to pay operating expenses and more than $150 million in bonded debt, loans, and taxes.
"But even taking that in consideration," Kolder says, "their expenses only went up six-and-a-half percent., whereas revenues only went up 41% from the prior year."
However, in the audit, the telecommunication service did end with a loss--that is, if you factor in the depreciation and write off old equipment.
"This was an accumulation over a few years of operation where you have some of this obsolete equipment," Kolder said. "That's normal for any particular business. I think they've been in operation for three-and-a-half to four years, really, of 'true' operations.
"So consequently, this is an accumulation of obsolete equipment. It's no longer useful, it's no longer used, and it had to be written off."
If you factor out that expense of aging equipment, Fiber had enough to end up "cash positive" by the end of the year. Another reason they are cash positive is that they don't have to pay taxes yet. They say they pay taxes because they are required to do so. As a result, it is marked as an expense. However, the money actually never goes anywhere.
"It's an item that is not requiring an outflow of cash, because . . . it's staying within Fiber," Kolder said. "So, consequently, he's saying 'we took it as an expense'--as I indicated, as miscellaneous expense, or as an administrative expense, and so, consequently, he wants to add it back because it doesn't require an outflow of cash. (It's) very similar to the depreciation situation."
They will be paying back those taxes at a later date when they become self-sustaining. Kolder predicts that could be by the end of 2014, which would be the fiscal year of 2015.